NOTE FROM: OLIVER NORTH Subject: Special
Mtg: Central America Will, please pass to Don: This weekend's trip to Honduras
and El Salvador was the most depressing venture in my four years of working
the Centam issue. There is great anxiety that the Congress will not act
in time to stave off a major defeat for the resistance. This sense exists
in the Govts. of Honduras and El Salvador but most alarmingly is now evident
in the resistance itself. The lack of a reliable source of resupply has
not only affected combat operations, it is now beginning to affect the
political viabllity of the UNO leadership. Bermudez, in front of the Southern
Front commander, El Negro Chammoro questioned the need for UNO and the
drain of scarce resources to support the Atlantic and Southern fronts.
While he committed to send in 6-8000 troops in the next few days, he openly
admitted in front of Bustillio that they wd have to come back out in 15-20
days if there is no resupply. As known, their most pressing need is for
anti-air, but other things are now running short as well. The entire force
is back to 1 meal per day and no more boots, uniforms, packs, ponchos or
weapons are available for tbe new recruits. All new trainees will be turned
away effective today. All hospitalization for WIAs will cease at the end
of the week. Troops returning to Nicaragua this week will carry only70-100
rounds of ammo instead of the 500 they had been carrying. No new radio
batteries are available so there is no way to pass commands or intelligence.

Tbe picture is, in short, very dismal unless
a new source of "bridge" funding can be identified. While we should not
raise specific sources with Fred et al, we need to explore this problem
urgently or there won't be a force to help when the Congress finally acts.
Warm regards, North

NOTE FROM: ROBERT MCFARLANE SUBJECT: Current
Events Having been out of town for two days and maintaining the no comment
line, I returned today to find that Don Regan has backgrounded the weeklies
and laid the entire problem at my feet; my idea, my management, a strict
arms for hostages deal, no larger agenda in mind, etc. I was told this
not by a journalist but by my closest friend who had been getting calls
all day to the effect that "Bud is being hung out to dry by Don Regan."
I stillhave not commented to anyone.

But I must tell you that if this is true,
I will be quite mad. This will be the second lie Don Regan has sowed against
my character and I won't stand for it.

It might be useful to review just what
the truth is.

You will recall that when the Israelis
first approached us in June '85, I presented the idea of engaging in a
dialogue with the Iranians--no mention at all of any arms exchanges at
all--and he approved it.

We then heard nothing until August when
the Israelis introduced the requirement for TOWs. I told Kimche no.

They went ahead on their own but then asked
that we replace the TOWS and after checking with the President, we agreed.
Weir was released as a consequence of their action.

My next involvement was to go to London
where I presented our willingness to open a political dialogue but that
we could not participate in an arms transfer for hostages. Gorbanifar ranted
and raved but we did not change our position.

I returned to the States and debriefed
the President (with Cap present, and Regan) that we had taken the position
of being open to a political dialogue once our hostages were released but
not before and ruled out an arms transfer. I also said that Gorbanifar
was not to be trusted and recomended that we no longer carry on business
with him. You were present John. I then left the government.

Some dialogue must have continued with
Gorbanifar between New Year's and April, notwithstanding my recommendation.
In April you contacted me to go to Iran to open the political dialogue.
I did so. Once there, faced with bad faith on their part (not having released
our people and without meetings with the decision makers) I aborted the
mission. Ollie can verify all this.

Upon my return, I debriefed the trip and
once more recommended against carrying on the arms connection but waiting
them out on the political dialogue.

Now this is a far cry from the way Regan
is supposed to be reporting it John. I have supported the idea of the political
dialogue but time and again, have registered my opposition to the arms
deal. You know that.

If any of these reports of what Regan is
saying are true--they are supposed to be in Time and Newsweek on Monday--it
will be cause for a libel suit by me.

I am perfectly willing to carry on the
no comment approach; that seems to me to best serve the hope of preserving
the position of Rafsanjani et al. But I won't tolerate lies from Don Regan.
John,itmight be useful for you to try to find out from Don or by asking
the mags directly, just what are they running with. I have made no comment
(other than the "fanciful and fictitious" line in my Cleveland Q&A)
and will not.

SUBJECT: Saudi arms Lynn Sachs is checking
with Lugar's staff on the basis of his optimistic assessment. Hope to have
an answer shortly. Again, I suspect Lugar made a seat of the pants judgement.
If he had taken a head count, he would have gone to Dole at some point,
and he obviously did not. On the idea of notifying the whole package, then
dropping MSIP, ALQ-171, and Blackhawks, I am pessimistic because: - the
pressure wd be to drop out the missiles. - whatever was dropped out would
be next to impossible to notify later this year. - it makes the President
look weak and would be interpreted exactly that way in the Mideast. Have
checked with Dick Murphy who also agrees we should not withdraw part of
the package for the above reasons. cc: NSJC --CPUA NSRKS --CPUA NSLSS --CPUA
cc: NSJRS --CPUA NSPBT --CPUA NSKKS --CPUA

NOTE FROM: JOHN POINDEXTER SUBJECT: Iraq
Financial Situation Al Haig yesterday expressed his concerns with Iraq's
ability to hang on in the war. He agrees with our impartiality policy,
but feels as we do that we can not permit Iraq to fall. He wondered if
there was anyway we could help their financial situation through the multi-laterals.
Let's take a look at that.

NOTE FROM: TRIP XXXX Subject: HOSTAGES
Fully agree that if the current effort fails to achieve release then such
a mission should be considered. You will recall that we have not had much
sucess with this kind of endeavor in the past, however. After CIA took
so long to organize and then botched the Kilburn effort. Copp undertook
to see what could be done thru one of the earlier DEA developed Druze contacts.
Dick has been working with Nir on this and now has three people in Beirut
and a 40 man Druze force working "for" us. Dick rates the possibility of
success on this operation as 30%, but that's better than nothing.

In regard to U.S. military rescue ops,
JCS has steadfastly refused to go beyond the initial thinking stage unless
we can develop some hard intelligence on their whereabouts. We already
have [Deleted, (b)(1)(s) exemption] one ISA officer in Beirut but no effort
has been made to insert personnel since we withdrew the military mission
to the LAF?. If we are really serious, we should start by getting CIA to
put a full time analyst on the HLTF and then organizing a planning cell-
preferably not in the pentagon, but at CIA, to put the operation together.
Dick, who has been in Beirut, and who organized the second Hcan? mission,
is convinced that such an operation could indeed be conducted. My concern
in this regard is that JCS wd insist on using most of the tier 2 and 3
forces in such an undertaking. If you want me to task this thru the OSG
we will do so, but urge that we start by you having Casey staff the HLTF
as directed.

To: NSPSS --CPUA 12/21/87 18:52:48

*** Reply to note of 12/21/87 14:48NOTE FROM: Colin L. PowellSubject: General Powell's Schedule CONFIDENTIALThanks for your concerns. I feel quite
safe on post and in quarters. I will vary the route; that's easy to do
because there are multiple routes off Ft yer. My days in Frankfurt made
me quite security conscious. I feel safe on post because I doubt terrorists
would risk targetting the house. They don't have a good opportunity to
recon it and the constant MP patrolling makes it silly for them to do so.
My vulnerability is just after leaving post in the morning.) It's too hard
to vary the time much in the morning but varying the route covers that
threat. I had an alarmed house when I lived at Ft McNair earlier this year.
Pain in the neck. Scared hell out of the family initially and then became
amusing when the MPs assaulted the house every time the alarm misfired.